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Interim relief in aid of foreign proceedings

Prior to the Introduction of Civil Justice Reforms in Hong Kong on 2 April 2009, the ability of a foreign plaintiff to obtain interim relief in Hong Kong in aid of foreign proceedings was limited by reason of the Privy Council’s decision in Mercedes Benz AG v Leiduck [1996] 1 AC 284 which held that unless there was jurisdiction to obtain substantive relief in Hong Kong, a plaintiff in foreign proceedings could not obtain interim relief to protect any of the defendant’s assets that may be located in Hong Kong. The rationale for this was that such interim relief was dependent upon, and incidental to, there being a pre-existing cause of action in Hong Kong. This article contains examples of cases where interim relief has been granted in Hong in aid of foreign proceedings under section 21M of the High Court Ordinance, which was introduced with the Civil Justice Reforms on 2 April 2009.

Introduction of Section 21M of the High Court Ordinance

The introduction of section 21M of the High Court Ordinance means that it is no longer necessary for a foreign plaintiff to have a claim for substantive relief in Hong Kong. Under the section, the Court may appoint a receiver or grant interim relief in relation to proceedings which (1) have been or are to be commenced in a place outside Hong Kong; and (2) are capable of giving rise to a judgment which may be enforced in Hong Kong under any Ordinance or common law or through the Foreign Judgments (Reciprocal Enforcement) Ordinance (however, as a general rule, the judgment must be a final and conclusive monetary judgment).

Recent cases on the subject

JSC BTA Bank v Mukhtar Kabulovich Ablyazov [2014] HKEC 296

An ex parte application was made by JSC BTA Bank (the Bank) for interim relief in aid of foreign proceedings against Mukhtar Kabulovich Ablyazov (“Ablyazov”) under s.21M of the High Court Ordinance.

The Bank sought:

an order appointing receivers over the shares and assets of two Hong Kong companies, Kazoil Astana Group Ltd. (“Kazoil”) and Maxray Logistics Ltd. (“Maxray”); and

a freezing order restraining Ablyazov from dealing with the shares and assets of Kazoil and Maxray.

By way of background, Ablyazov was the former chairman of the Bank and it was alleged that he committed widespread misappropriation of the Bank’s funds involving billions of US dollars which he had secured through a web of offshore companies controlled and managed on his behalf, or through, a network of nominees and associates.

From 2009, the Bank had commenced eleven sets of proceedings against Ablyazov and his associates in England, seeking to recover sums in excess of US$5 billion.

The Hong Kong Court was satisfied that the Plaintiff had made out a good arguable case. Further, the English judgments were capable of being enforced in Hong Kong and would be conclusive in Hong Kong if:

they were final and conclusive on the merits;

made by a court of competent jurisdiction over the parties and the subject matter;

made between the same parties or their privies on an identical issue;

they were for a monetary sum where the plaintiff sought to enforce as well as recognize the foreign judgment; and

were not impeachable according to the rules on conflict of laws of Hong Kong.

The Hong Kong Court was of the view that there was a real risk of dissipation of the Defendant’s assets in Hong Kong and satisfied that a receiver was necessary to ensure that there was full accounting of assets to prevent their dissipation or removal. The Court found that it was a clear case of where s.21M relief would assist foreign proceedings and that it was just and convenient to exercise the Court’s discretion in the Bank’s favour.

Ming Hsieh v Xu Zhe & Ors [2015] HKCU 763

Background

On the Plaintiff’s application, the Hong Kong Court granted an ex parte injunction whereby the Defendants were restrained from removing or disposing of their assets in Hong Kong, up to the value of US$54 million (the Injunction Order). The Injunction Order was granted under s.21M of the High Court Ordinance, in aid of foreign proceedings which had been commenced by the Plaintiff against the Defendants in California (the “US Proceedings”).

At the time of the Injunction Order, the Plaintiff had applied for and obtained in the US Proceedings a Temporary Protective Order (“TPO”) (equivalent to a freezing order in Hong Kong) against the Defendant’s assets, and the TPO was made by the US Court against the proceeds of sale of a house in California and the Defendants’ funds in a bank account up to the value of US$54 million. The TPO was extended to expire on 3 March 2015, and on 28 January 2015, the Plaintiff issued a Writ of Attachment in the US Proceedings to continue the effect of the TPO against the Defendants.

The Defendants sought to discharge the Injunction Order on the ground of material non-disclosure by the Plaintiff when he applied for it, and further opposed the continuation of the Injunction Order by reason that the US Court had, since the making of it refused the Plaintiff’s Writ of Attachment for the continuation of the TPO. The Defendants’ argument was that the Plaintiff had failed to show that it had a good arguable case for the grant or continuation of the Injunction Order, and that it would be unjust and inconvenient to grant the order under s.21M of the High Court Ordinance.

The Plaintiff’s Claim

The Plaintiff’s claims against the Defendants were that he was induced by fraudulent misrepresentations by the 1st and 2nd Defendants (husband and wife) to invest money in a business in Mainland China by the name of Antu WangMin Changfu Agricultural Company Limited (“WMCF”).

The Defendants’ Case to Discharge the Injunction Order

The Defendants’ case on material non-disclosure was that the Plaintiff had failed to disclose to the Court at the time when it applied for the Injunction Order that the Plaintiff had entered into various agreements concerning WMCF.

The Court’s Decision

The Hong Kong Court was of the view that the Plaintiff had made out a good arguable case of fraud and that there was a risk of dissipation of the Defendants’ assets in Hong Kong without the protection of a Mareva injunction.

Although the Hong Kong Court was of the view that the Plaintiff’s non-disclosure of material facts could not be described as “not serious”, on balance, and in view of the relevant circumstances, the Court found it disproportionate to deny the injunctive relief sought by the Plaintiff when the Plaintiff could be adequately penalized in costs for his failure to discharge his duty to make full and frank disclosure.

The Hong Kong Court therefore discharged the Injunction Order on the ground of the Plaintiff’s material non-disclosure, but granted a new order in its place in the same terms against the Defendants.

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